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The Bank of Ghana has explained why it revoked the licenses of 23 Savings and Loans companies. Here are the reasons:
- ACCENT FINANCIAL SERVICES LIMITED
Accent Financial Services Limited was incorporated in Ghana on 21st November, 2012
and was licensed by the Bank of Ghana to commence operations in June 2013.
The institution has been insolvent since March 2017. The Bank of Ghana has since
March 2017 engaged the Board and Senior Management of the institution on the need
to inject additional capital but that yielded no results.
The specific issues that led to the revocation of its license included the following:
a. The institution had a net worth of negative GH¢55.76 million as at end
February 2019, in violation of section 28(1) Act 930.
b. The institution had a capital adequacy ratio of negative 144.30% as at end
February 2019, in violation of section 29(2) of Act 930.
c. The institution has been facing serious liquidity challenges as it has been
unable to meet customer withdrawal requests since 2017. The Bank of Ghana
has received many complaints from customers regarding the inability of the
institution to meet their withdrawal demands.
d. Most of the institution’s investments portfolio had no supporting documents
whilst loans granted to related parties were concealed from the Bank of
Ghana.
e. High non-performing loans due to poor underwriting standards
f. Creative accounting practices, thereby misrepresenting the institution’s true
financial condition and thereby misreporting its true financial position to the
Bank of Ghana.
g. Corporate governance weaknesses with weak Board and Management
oversight.
h. The institution is currently not engaged in normal business activities as a
result of its capital and liquidity challenges. - ADOM SAVINGS AND LOANS LIMITED
Adom Savings and Loans Company Limited is a financial services company incorporated
under the Companies Act, 1963 (Act 179) in January 2010 and licensed by the Bank of
Ghana to operate as a savings and loans company in August 2016. The company
commenced operations in November 2016.
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A review of the institution’s performance in August 2018 revealed that it was insolvent.
The institution’s reported capital adequacy ratio and net worth as at May 2019 were
negative. The Bank of Ghana has since August 2018 engaged the Board and
Shareholders of the company on the need to inject additional capital.
Among other things, the Bank of Ghana’s supervisory assessments revealed the
following:
a. The institution’s Net worth of negative GH¢9.60 million as at end May 2019
violated section 28(1) of Act 930.
b. The institution’s capital adequacy ratio of negative 126.23% as at end May 2019
was in violation of Section 29(2) of Act 930.
c. Non-performing related party exposures were far in excess of the statutory limits.
d. The Institution has consistently breached the minimum cash reserve ratio
requirement since 11th July, 2018 mainly as a result of its liquidity challenges. The
institution is also unable to meet withdrawals of customers.
e. Poor earnings due mainly to high management fees paid to related parties.
f. Weaknesses in Board and Senior Management oversight, including the fact that
the institution have been without a substantive Managing Director since
September 2018.
g. Poor credit underwriting standards and weaknesses in risk management function
resulting in high non-performing loans.
h. The company did not keep accounting records in a manner that gives an accurate
and reliable account of the transactions of the company thus not showing a true
and fair view of its operations. - ALLTIME FINANCE LIMITED
AllTime Finance Limited was licensed by Bank of Ghana to operate as a finance house in
July 2017 and commenced operations in August, 2017.
A review of the institution’s operations as at end-August 2018 revealed that Alltime
Finance Limited was insolvent with adjusted negative capital adequacy ratio and
networth. The Bank of Ghana has been engaged the institution on several occasions on
the need to rectify its capital deficiency.
The key issues that led to the revocation of license of the institution include the
following:
a. The institution’s Net worth of negative GH¢23.15 million as at end May 2019 was in
violation of Section 28(1) Act 930.
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b. The institution’s capital adequacy ratio of negative 47.41% as at end May 2019 was
in violation of Section 29(2) of Act 930.
c. The institution is over-exposed to its related company, AllTime Capital Limited to the
tune of GH¢18.19 million in violation of regulatory limits.
d. The Institution has not been able to meet depositors’ withdrawals. The Bank of
Ghana has also received many complaints from the Institution’s customers of its
inability to pay their deposits.
e. Failure on the part of the Board to adequately exercise oversight on the institution.
f. Failure to implement Bank of Ghana on-site examination recommendations.
g. The institution amended its shareholding structure and business name without
furnishing the details to the Bank of Ghana for approval.
h. The company did not keep accounting records in a manner that gives an accurate
and reliable account of its transactions. This is considered unsafe and unsound
banking practices. Specific examples include misrepresentation of investments and
deposits in related companies, and over exposure of Loan facilities to related parties. - ALPHA CAPITAL SAVINGS AND LOANS LTD.
Alpha Capital Savings and Loans Limited was licensed by the Bank of Ghana in January
2015 and commenced operations in April 2015.
A review by Bank of Ghana in December 2016 assessed the institution to be insolvent
with a negative capital adequacy ratio. The institution’s CAR continued to decline up to
September 2017 when it stopped submitting required monthly reports to the Bank of
Ghana. The Bank of Ghana has been engaging the Board and Senior Management on
the need to inject additional capital but all efforts yielded no results.
The specific issues that led to the revocation of the institution’s license includes the
following:
a. The institution’s Net worth of negative GH¢11.51 million as at end May 2019,
violating Section 28(1) of Act 930.
b. The institution’s capital adequacy ratio of negative 81.05% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The Institution has not been able to meet depositors’ withdrawals, leading to
customer agitations and confrontations. The Bank of Ghana has also received
many complaints from the Institution’s customers of its inability to pay their
deposits.
d. Weaknesses in Board and risk management oversight functions.
e. Failure to implement Bank of Ghana on-site examination recommendations.
f. The institution has ceased operations and closed its offices to the general public.
8 - ASN FINANCIAL SERVICES LIMITED
ASN Financial Services Ltd. (ASN) was licensed by the Bank of Ghana as a Finance House
on July 14, 2014.
The institution has remained insolvent with serious liquidity challenges since October - Its capital adequacy ratio and net worth as at end-June2019 were negative.
The Bank of Ghana has engaged the shareholders several times on the need to inject
additional capital to rectify the capital deficiency. The issues that led to the revocation of
the institution’s license included the following:
a. The institution’s Net worth of GH¢628,311.16 as at end May 2019, violating
Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 81.39% as at end May 2019
was in violation of Section 29(2) of Act 930.
c. Persistent breaches in the cash reserve ratio requirement since 2016 due to
serious liquidity challenges.
d. The institution has been unable to honour customer’s withdrawal requests with
many customer complaints received by the Bank of Ghana.
e. The use of depositors’ funds to finance some related party projects.
f. Failure to implement Bank of Ghana on-site examination recommendations.
g. Weaknesses in corporate governance practices as the institution has been
without a functioning board and key management personnel with the relevant
qualifications and experience to conduct the business of banking.
h. Poor risk management culture and weak credit underwriting standards leading to
high non-performing loans. - CDH SAVINGS AND LOANS LTD.
CDH Savings and Loans Limited commenced operations in 2016 after taking over Ivory
Finance Company Limited which had been operating since the year 2000.
In September 2018, CDH Savings & Loans Limited (CDH) was identified as insolvent per
the August 2018 prudential returns submitted. CDH itself reported a negative Capital
Adequacy Ratio which was further adjusted downward by the Bank of Ghana. The Bank
of Ghana also noted severe liquidity challenges which threatens the ability of the
institution to operate as a going concern as an additional issue. The Bank of Ghana has
since engaged extensively the Board and Senior Management on the need to inject
additional capital into the company, and plans repeatedly submitted by CDH to the
Bank of Ghana to address supervisory concerns have failed to materialise.
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The Specific issues which led to the revocation of the company’s license are the
following:
a. The institution’s Net worth of negative GH¢171.36 million as at end May 2019
violated Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 35.90% as at end May 2019
was in violation of Section 29(2) of Act 930.
c. The recognition of income on non-performing loans/exposures by the company
contrary to Directives of the Bank of Ghana. Income on non-performing
loans/exposures were to be suspended until such time as the loans/exposures
became performing but CDH did not comply with this Directive, resulting in an
overstatement of its revenue and assets in the financial statements over several
years.
d. The transfer of collateral security supporting the institution’s non-performing
loans/exposures to affiliate companies using creative accounting with no
resultant cash inflow to the company which resulted in the overstatement of the
balance sheet.
e. The overexposure of CDH to its affiliate companies to the tune of 319% contrary
to the regulatory limit of 25%.
f. The failure of CDH to sell repossessed collaterals caused liquidity challenges
resulting in the company’s inability to meet withdrawal requests from numerous
depositors. The Bank of Ghana kept receiving complaints from individuals and
institutions of their inability to access/withdraw funds from their accounts.
g. The inability of CDH to access placements/investments with other insolvent
financial institutions, including related companies, worsened its solvency liquidity
situation. - COMMERZ SAVINGS AND LOANS LIMITED
Commerz Savings and Loans Limited (formerly known as Sterling Savings and Loans
Limited and part of Nordcom Africa Holdings Limited) was licensed by the Bank of
Ghana in December 2016 and commenced operations in February 2017.
As a result of persistent complaints by customers that the institution was unable to meet
their withdrawal request, the Bank of Ghana reviewed the operations of the institution.
The institution was found to be insolvent with an adjusted negative capital adequacy
ratio with serious liquidity challenges. Bank of Ghana has since engaged the Board and
Senior Management on the need to inject additional capital but that have not yielded
any positive results.
The specific issues that led to the revocation of its license includes the following:
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a. The institution’s Net worth of negative GH¢40.99 million as at end May 2019
violated Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 126.15% as at end May 2019
violated Section 29(2) of Act 930.
c. Serious liquidity challenges causing the inability of the institution to meet
withdrawal demands of its customers.
d. High and increasing non-performing loans (NPLs) ratio due to poor credit
underwriting standards.
e. Weaknesses in risk management oversight resulting in poor investment decisions. - CREST FINANCE HOUSE LIMITED
Crest Finance House Limited was originally incorporated as Apex Finance House Limited
on September 2, 1997. The name was changed from Apex Finance House Limited to
Crest Finance House Limited and subsequently licensed to operate as a Finance House
on 5th June 2007.
In 2015, Bank of Ghana found the institution to be insolvent with serious liquidity
challenges. The institution’s capital adequacy ratio and net worth as at October 2015
were severely negative.
The specific issues that led to the revocation of its license included the following:
a. The institution’s Net worth of negative GH¢17.55 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 6,873.50% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. Non-performing exposures to its parent company and a company in which the Chief
Executive Officer is a director in excess of statutory limit. The exposures also
contributed significantly to the institution’s liquidity challenges.
d. The institution’s total loan portfolio was non-performing due to poor loan
underwriting standards and related party exposures.
e. The institution was unable to honour its customers’ withdrawal request.
f. Weaknesses in corporate governance practices and poor risk management culture
contributed to the institution’s problems.
g. The institution has ceased operations and closed its offices to the general public,
without approval from the Bank of Ghana.
11 - DREAM FINANCE LIMITED
Dream Finance Limited (DFL) was licensed by the Bank of Ghana on October 25, 2013 as
a Finance Company.
Based on a 2015 review of the institutions operations, Bank of Ghana found Dream
Finance to be insolvent and also facing liquidity challenges mainly as a result of the
institution’s non-performing exposures to its related companies. The Bank of Ghana
subsequently engaged the directors of the institution and agreed on a timeline to
resolve the solvency and liquidity challenges. The institution failed to comply with
the agreed plan. The institution’s capital adequacy ratio and net worth are both
negative as at end-May 2019.
The specific issues that led to the revocation of the institution’s license include the
following:
a. The institution’s Net worth of negative GH¢333.46 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 7,508.10% as at end May 2019
is in violation of Section 29(2) of Act 930.
c. The use of depositors’ funds to finance related party projects. The institution is
over exposed to six (6) of its related companies. The non-performing related
party exposures, has contributed significantly to the liquidity challenges of the
institution.
d. The institution has persistently breached the cash reserve ratio requirement since
2015 due to serious liquidity challenges. It is also unable to honour customer’s
withdrawal requests.
e. The institution changed its name from Dream Finance Limited to El Finance
Limited and also relocated its Head Office without the prior approval of the Bank
of Ghana.
f. Weaknesses in corporate governance practices as the institution is without a
functioning board and key management personnel with the relevant
qualifications and experience to do the business of banking.
g. The institution was involved in creative accounting practices, thereby
misrepresenting and misreporting its true financial position to the Bank of
Ghana.
h. The institution failed to implement Bank of Ghana on-site examination
recommendations.
i. The institution is currently not engaged in normal business activities as a
result of its capital and liquidity challenges.
12 - EXPRESS SAVINGS AND LOAN LIMITED
Express Savings and Loans Company Limited (ESLL) was licensed by the Bank of Ghana
on 14th August, 2007.
The institution has remained insolvent since 2016 due to the inability of the
shareholders to inject additional capital into the company. The institution has failed to
meet the capital plan submitted to the Bank of Ghana in February 2018 requiring the
institution to inject additional capital by end-April 2018 and subsequently to the
required minimum. The institution’s adjusted capital adequacy ratio and net worth are
both severely negative. as at end-May 2019.
The specific issues that resulted in the revocation of the institution’s license include the
following:
a. The institution is insolvent and has consistently failed to meet the minimum Capital
Adequacy Ratio requirement since 2016 due to accumulated losses.
b. The institution’s Net worth of negative GH¢119.83 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
c. The institution’s capital adequacy ratio of negative 610.52% as at end May 2019 is in
violation of Section 29(2) of Act 930.
d. The institution has persistently failed to meet the minimum cash reserve ratio
requirement and customer withdrawal requests since 2014. Cash reserve requirement
as at end May 2019 was 0.23%
e. The institution is overexposed to its related parties with regards placements.
f. The institution has failed to submit as well as publish its audited financial statements
since 2016 in breach of Act 930, which requires financial institutions to publish and
furnish Bank of Ghana with a copy of their audited financial statements not later
than four (4) months after the end of the financial year.
g. The institution has closed down fourteen (14) of its eighteen (18) branches as at May,
2019 without prior approval from the Bank of Ghana in breach of Section 25(2) of
Act 930. - FIRST ALLIED SAVINGS AND LOANS LIMITED
First Allied Savings and Loans Limited (FASL) was licensed by Bank of Ghana to operate
as a savings and loans company on March 27, 1996.
First Allied Savings & Loans Ltd. (FASL) was found to be insolvent with a negative Capital
Adequacy Ratio and a negative net worth as of 31 March 2018. The Bank of Ghana
directed the Board Chairman/Majority Shareholder and Management of the Institution
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to immediately inject additional capital to address the capital deficiency. In June 2018,
the Bank of Ghana received reports of a run on the institution FASL due to its inability to
meet customers’ deposit withdrawals, especially at its Kumasi and Adabraka Branches.
The liquidity challenges later spread to all the twenty-seven (27) branches of the
Institution across the country. The shareholders have failed to address these liquidity
challenges.
A review of the institution’s operations in July 2018 revealed that its reported financial
statements did not reflect its true state of affairs. An adjustment to the financials
resulted in an assessed negative Capital Adequacy Ratio and negative networth mainly
due to huge accumulated losses recorded over the years, additional provision for loan
losses and reversal of unearned interest receivables from income.
The specific issues that led to the revocation of its license included the following:
a. The institution’s Net worth of negative GH¢661.84 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 263.21% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The income surplus and profit & loss accounts per the General Ledger as at 31st
August, 2018 showed losses but the institution reported positive Income Surplus
and Profit and Loss figures in the prudential returns as at 30th June 2018 submitted
to the Bank of Ghana.
d. The reported deposit liabilities were grossly understated as at end-June 2018,in
effect, reducing customer deposits to conceal losses over the years.
e. Total non-performing loans constituted 88.89% of the institution’s total loan
portfolio.
f. The current accounts of eight (8) related companies linked to the major
shareholder were overdrawn in excess of GH¢100.00 million and were nonperforming.
g. The Institution purportedly advanced credit facilities to various institutions,
predominantly churches and schools without proper documentation. These
facilities are non-performing
h. The Institution stopped submitting prudential returns to Bank of Ghana in June
2018, citing technical challenges.
i. The Institution cannot meet the deposit withdrawals of its customers with many
customer complaints received by the Bank of Ghana.
14 - FIRST AFRICAN SAVINGS AND LOANS LIMITED
First African Savings & Loans Company Limited was incorporated in November 1993 to
undertake money transfer and remittance business. It was licensed by Bank of Ghana to
operate as a savings and loans company in October 2009.
The company was found to be experiencing liquidity and capital adequacy challenges
since 2017. In addition, the Bank of Ghana determined in August 2017 and December
2018 confirmed that the company was insolvent. The Bank of Ghana has since October
2018 engaged the Board and Senior Management on the need to inject additional
capital.
The specific issues that led to the revocation of its licence included the following:
a. The institution’s Net worth of negative GH¢22.29 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 90.15% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The company failed to conduct due diligence on its counterparties resulting in
the impairment of some of its investments.
d. The company’s affiliate, First African Remittances, UK failed to reimburse funds
totalling GH¢5.40 million due to First African Savings and Loans. First African
Savings and Loans pre-financed remittance receivables and the said amount has
been outstanding for over two years. The long outstanding remittance receivable
has been provisioned as a loss.
e. The company’s Non-Performing Loans ratio has been deteriorating since 2017 to
virtually 100% non-performing at end May 2019.
f. The company has consistently violated the minimum cash reserve ratio
requirement, which is the regulatory measure of the liquidity position of deposit.
g. The institution is unable to meet the withdrawal demands of its depositors. The
institution has related party exposure which it is unable to recover. - FIRST GHANA SAVINGS AND LOANS LIMITED
First Ghana Savings and Loans Company Limited (FGSL) was a specialised deposit-taking
institution originally licensed to operate as a mortgage financing institution. It was
established in 1956 under the Building Societies Ordinance of 1955 and operated as a
Building Society under the name ‘First Ghana Building Society’ (FGBS). In 2006, the
institution changed its corporate status from a Building Society to a limited liability
company which was renamed First Ghana Building Company Limited. Following the
issuance of a savings and loans license on March 8, 2015 by Bank of Ghana, the
institution’s name changed to First Ghana Savings and Loans Company Limited.
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The specific issues that led to the revocation of its license included the following:
i. The institution’s Net worth of negative GH¢14.08 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
ii. The institution’s capital adequacy ratio of negative 54.47% as at end May 2019 is in
violation of Section 29(2) of Act 930.
iii. The cash reserve ratio of was below the required minimum of 10% from January
2019 to end-April 2019.
iv. The institution has failed to submit a credible capital restoration plan to restore it
to solvency.
v. The Bank of Ghana has repeatedly engaged the Board and Senior Management on
the need to inject additional capital but this has not yielded any positive results. - FIRSTRUST SAVINGS AND LOANS LIMITED
FirsTrust Savings and Loans Company Limited (FTSL) was authorised as a savings and
loans by the Bank of Ghana on September 19, 2014 and was issued a license as FTSL on
January 28, 2015. The name was changed to FirstTrust in January 2015. . Prior to this,
the institution was known as EZI Savings and Loans (EZI) Limited which was licensed by
the BOG as a savings and loans institution on October 11, 2007 until its acquisition by
Ideal Financial Holdings in 2014.
Bank of Ghana’s reviews conducted in 2015, 2016 and 2017 all showed that the
institution was showing severe signs of distress. The institution reported a negative
capital adequacy ratio and net worth as at end-May 2019.
The Bank of Ghana engaged the Board and Senior Management on the need to inject
additional capital. The specific issues that led to the revocation of its license included
the following:
a. The institution’s Net worth of negative GH¢175.90 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 132.96% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The institution has breached the statutory cash reserve ratio (CRR) requirement
since January 2018. The institution is currently facing challenges in meeting
customer withdrawals, with numerous customer complaints to the Bank of Ghana.
Cash reserve requirement as at end May 2019 was 0.07%
d. The use of depositors’ funds to finance related party projects. The institution is
over exposed to six (6) of its related companies to the tune of GH¢17.93 million.
The non-performing related party exposures, has contributed significantly to the
liquidity challenges of the institution.
e. Weaknesses in corporate governance practices as the institution is without a
functioning board since August 2018.
f. The institution has consistently failed to implement Bank of Ghana on-site
examination recommendations including the payment of penalties imposed for
breaching some sections of Act 930.
g. The institution failed to keep accounting records in a manner that gives an
accurate and reliable account of its transactions. This constitutes unsafe and
unsound banking practice.
Bank of Gnana declined a request dated 25th July, 2019 to merge the operations of
FirsTrust Savings and Loans Limited and Ideal Finance Limited because the two
institutions under consideration are both insolvent and illiquid. The total projected
cash injection of GH¢127.00 million, if approved, will lead to total shareholders’
funds of the proposed merged entity from negative GH¢291.60 million to negative
GH¢164.60 million and CAR from negative 78.32% to negative 47.26% leaving a
significant capital deficit of GH¢234.05 million. The merger was therefore, not going
to address the current financial challenges facing the two institutions, or improve
their future prospects. - GLOBAL ACCESS SAVINGS AND LOANS COMPANY LIMITED
Global Access Savings and Loans Company Limited was incorporated under the laws of
Ghana in 1998 and commenced business in February 2000 as a Partner Agent of ADB in
the Western Union Money Transfer Business. The company grew and added other
money transfer services to its remittance product line. Following the changing need of
customers, Management decided to convert the company into a Savings and Loans
Company. The company was granted a savings and loans company license on 15th June,
2009 by the Bank of Ghana and it commenced operations on December 6, 2010.
The institution has been insolvent since 2016 with serious liquidity challenges. The
reported capital adequacy ratio and net worth are both negative. The Bank of Ghana
has had several engagements with the Board and Senior Management on the need to
inject additional capital but have not yielded any fruitful results. The institution rather
opted to apply for liquidity support from the Bank of Ghana which was declined due to
its insolvency position.
The specific issues that led to the revocation of its license included the following:
a. The institution’s Net worth of negative GH¢58.19 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 195.06% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The institution has breached the statutory cash reserve ratio requirement since
2016.
d. The institution assumed the liability of a loan contracted by the majority
shareholder amounting GH¢2.91 million. The loan amount was injected into the
institution as equity capital. The liability was however concealed as a suspense
account in the books of Global Access Savings and Loans Limited.
e. The institution continues to record accumulated losses due mainly to high rent
expenses paid to the majority shareholder for the use of its premises.
f. The institution failed to keep accounting records in a manner that gives an
accurate and reliable account of its transactions constitutes unsafe and unsound
banking practice
g. The institution failed to implement Bank of Ghana’s on-site examinations findings
conducted in October 2018.
h. There have been several complaints from customers about the inability of the
Institution to honour depositors’ withdrawals.
i. The company neither published nor submitted its 2017 Audited Financial
Statements to the Bank of Ghana contrary to Act 930.
18 - GN SAVINGS AND LOANS LTD.
GN Savings and Loans Company Limited was originally incorporated as First National
Savings and Loans (FNSL) Company Limited and licensed as a Savings and Loans
Company on 8th May 2006. It was subsequently issued with a universal banking license
by the Bank of Ghana on 4th September 2014 and was renamed GN Bank Limited.
On 4th January 2019, the Bank of Ghana approved a request to reclassify GN Bank from
a universal bank to a Savings and Loans company following its inability to meet new
required minimum paid-up capital of GH¢ 400 million by 31st December 2018. The
reclassification was to among other things enable the institution to downsize its
operations and also inject additional capital to resolve the acute liquidity challenges it
was confronted with. The Bank of Ghana subsequently appointed an Advisor to GN to
assist in the reclassification process.
In spite of the above, the institution has been unable to resolve its liquidity crisis and
has also not been able to meet the majority of the conditions the Bank of Ghana
imposed on the institution following its reclassification as a savings and loans
company. The financial condition of the institution has also deteriorated since the
reclassification with both negative capital adequacy ratio and negative net worth.
The Bank of Ghana has reached the conclusion that GN is currently insolvent under
section 123 (4) of the Banks and SDIs Act, 2016 (Act 930), being in breach of its key
prudential regulatory requirements. Its Capital Adequacy Ratio (CAR) is currently -61%,
in breach of the minimum required of 13%. It is also facing a severe liquidity crisis with
numerous complaints received by the Financial Stability Department of the Bank of
Ghana from aggrieved customers who have been unable to access their deposits with
the institution for the last several months. What is more, it has consistently failed to
meet the minimum cash reserve requirement of 10% of its total deposits, since the end
of the first quarter of 2019.
GN’s shareholders have failed to restore the bank to the required regulatory capital
and liquidity levels in spite of long-standing promises that new capital was expected
from foreign investors.
While GN has indicated that government owes it a total amount of GH¢942.98 million
of which GH¢102.73 million represented Interim Payment Certificates (IPCs), the Bank
of Ghana’s assessment is that IPCs totaling GH¢30.33 million only have been
confirmed by the Ministry of Finance as at 6th August 2019 as owed to contractors
that may be indebted to affiliates of GN. The Bank of Ghana’s supervisory assessment
shoeeds that even when the total outstanding IPCs amount of GH¢30.33 millionwas
considered, it still did not address GN’s capital deficit of -GH¢683.66 million.
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It must be noted that GN’s insolvency problems are largely attributable to overdraft
and other facilities it extended to its related parties who are other companies in the
Groupe Ndoum network of businesses, under circumstances that violated relevant
prudential norms. Of particular interest are the funds totalling GH¢761.55 million that
GN Bank as it then was, placed with its sister companies Ghana Growth Fund (Gold
Coast Advisors) and Gold Coast Fund Management Limited (now Blackshield Capital
Management), both licensed by the Securities and Exchange Commission. Some of
these funds were used by the two related parties to pay their customers whose
investments with them had matured, while some were also used to fund road and
other contractors, who claim to have worked on Government projects. It is important
to note that the IPCs claimed by GN are not supported by transactions that were
entered into directly by GN and such contractors or Government and its entities. They
reflect transactions entered into by Ghana Growth Fund or Gold Coast Fund
Management with these contractors using funds taken from GN under circumstances
that violated prudential norms. The failure of the two related parties to pay back these
funds to GN affected GN’s capital position, leading eventually to its insolvency and
acute liquidity challenges.
In addition to GN’s insolvency and liquidity challenges, the Bank of Ghana has found
other key regulatory violations such as the following:
The institution’s adjusted Net worth of negative GH¢30.70 million as at end May
2019 indicates that its paid up capital is impaired in violation of Section 28(1) Act
930.
The institution’s adjusted capital adequacy ratio of negative 61.20% as at end May
2019 is in violation of Section 29(2) of Act 930.
Contrary to section 64 (2) of the Banks and Specialised Deposit-Taking Institutions
Act, 2016 (Act 930), the institution’s exposure to its related party has consistently
been above the regulatory limit of 25% of net own funds (NOF). Exposures to other
affiliates companies were mainly payments made by the bank on behalf of such
affiliates.
The structure of GN’s balance sheet clearly shows that the bank mobilizes deposits
for its related companies. The inability of these related companies to honour their
obligation to GN has resulted in serious liquidity challenges and contributed to
their insolvency as all related party exposures are non-performing. The institution’s
high non-performing loans (NPL) was mainly attributed to these related party
exposures, which were never paid, thereby putting the deposits of its customer at
risk.
A recent Bank of Ghana investigation conducted at GN revealed that a significant
amount (USD62,255,516.93, GBP718,528.59 and EUR4,200) of depositors’ funds
held with GN had been transferred to International Business Solutions (another
company owned by Groupe Nduom and which is based in the U.S.A) without any
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documentation to support such transfers in breach of section 19 of the Foreign
Exchange Act 2006, Act 723, Section IV of Bank of Ghana Notice No.
BG/GOV/SEC/2007/4, and subsequent Bank of Ghana Notices issued in August
2014 prohibiting such practices.
The company is yet to publish its 2018 audited accounts contrary to section 90 (2)
of the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
Furthermore, the company did not keep accounting records in a manner that gives
an accurate and reliable account of the transactions of the company, and did not
therefore show a true and fair view of its operations.
GN has suspended operations in seventy (70) of its branches including the Head
office branch at Asylum Down and Castle Road branch, and temporarily suspended
its entire management team without the approval of the Bank of Ghana contrary to
section 25 (2) of the Banks and Specialised Deposit-Taking Institutions Act, 2016
(Act 930), mainly as a result of its insolvency and liquidity challenges. - IDEAL FINANCE LIMITED
Ideal Finance Limited was incorporated in 2009 under the Companies Act, 1963 (Act 179
and licensed by the Bank of Ghana under the Non-Bank Financial Institutions Act, 2008
(Act 774 as a money lending company. The company was subsequently licenced to carry
on the business of a finance house on 18th December, 2014 and established its head
office at East Legon in Accra.
Ideal Finance has been faced with severe insolvency and liquidity challenges over the
past two years. The Institution faces a significant capital shortfall with a Capital
Adequacy Ratio (CAR) of negative 33% in breach of the minimum required of 13% with
a corresponding capital deficit of negative Ghc188,257,625.35
The institution is also facing a severe liquidity crisis with numerous complaints received
by the Financial Stability Department of the Bank of Ghana from aggrieved customers
who have been unable to access their deposits with the institution for the last several
months. What is more, it has consistently failed to meet the minimum cash reserve
requirement of 10% of its total deposits.
The Institution’s shareholders have failed to restore the bank to the required regulatory
capital and liquidity levels in spite of long-standing promises that new capital was
expected from foreign investors.
The Bank of Ghana has found key regulatory violations such as the following:
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The institution’s adjusted Net worth of negative GH¢117.5 million as at end
November 2018 indicates that the paid up capital is impaired in violation of Section
28(1) Act 930.
The institution’s adjusted capital adequacy ratio of negative 32.8% as at end
November 2018 is in violation of Section 29(2) of Act 930.
Contrary to section 64 (2) of the Banks and Specialised Deposit-Taking Institutions
Act, 2016 (Act 930), the institution’s exposure to its related party has consistently
been above the regulatory limit of 25% of net own funds (NOF). Exposures to related
parties (FirstTrust Savings & Loans and Ideal Capital partners) were to the tune of
Ghc63.19 million.
The institution’s high non-performing loans (NPL) ratio of 23.2% was mainly
attributed to poor credit risk management, thereby putting the deposits of its
customer at risk.
The company is yet to publish its 2018 audited accounts contrary to section 90 (2) of
the Banks and Specialised Deposit-Taking Institutions Act, 2016 (Act 930).
Furthermore, the company did not keep accounting records in a manner that gives
an accurate and reliable account of the transactions of the company, and did not
therefore show a true and fair view of its operations.
Ideal Finance has not submitted their returns since November 2018. All efforts to get
them to submit have proven futile.
An onsite examination carried out in September 2017 revealed the following: - The institution did not appropriately classify fifteen (15) impaired loan accounts
in accordance with the requirements of the Bank of Ghana’s Guide for
Reporting Institutions, which resulted in an additional loan loss provision of
GH¢14,255,275.53. - The Institution was technically over-exposed to all its credit customers due to
its negative net own funds position which is in violation of Section 62(1) of Act
930. - Credit facilities granted to the affiliates of the Company were not approved by
the Board and the exposures were not reported to Bank of Ghana in breach of
Section 70(2) and 70(4) of Act 930. Total related party loans totaled GH¢52.70
million.
In a letter dated 25th June, 2019, the Bank of Ghana was notified about the intention to
merge the operations of Ideal Finance Limited (IFL) and FirsTrust Savings and Loans
Limited (FTSL). A review of the documents submitted in connection with the proposed
merger and all available records obtained from the two institutions revealed that:
22 - The shareholders’ funds of Ideal Finance Limited (IFL) and FirsTrust Savings and
Loans Limited (FTSL) as at March 2019 per the merger documents was negative
GH¢62.18 million and negative GH¢93.22 million respectively. - The reported shareholders’ funds of IFL per the last submitted prudential returns
as at November 2018 was GH¢28.89 million. This was adjusted to negative
GH¢117.50 million due to additional loan loss provisions and impaired
investments, resulting in a decline in the reported capital adequacy ratio (CAR) of
0.52% to negative 52.18%, indicating a capital deficit of GH¢171.92 million. - The reported shareholders’ funds of FTSL per the prudential returns for May 2019
of negative GH¢99.46 million was adjusted to negative GH¢174.10 million due to
impaired investments, resulting in a further reduction in the CAR of negative
48.67% to negative 132.96%, indicating a capital deficit of GH¢189.13 million. - The CAR of the merged entity was therefore assessed to be negative 78.32% with
a capital deficit of GH¢361.05 million. The merger will therefore, neither address
the current financial challenges facing the two institutions, nor improve their
future prospects. In the light of the above, BoG could not accede to the request
to merge the operations of FirsTrust Savings and Loans Limited and Ideal Finance
Limited. - The cash reserve ratios of FTSL as at May 2019 was 0.07% compared to the
regulatory minimum of 10%. - Both institutions are unable to meet customer withdrawal needs and the Bank of
Ghana has received countless complaints from customers of both institutions
about their inability to access their funds. - The use of landed property to shore up capital for the emerging entity is
considered unacceptable in the light of the insolvent and illiquid state of the two
institutions. - IFS FINANCIAL SERVICES LIMITED
IFS Financial Services Limited was incorporated on September 1, 2006 and licensed by
the Bank of Ghana on June 5, 2007 to operate as a Finance House.
Bank of Ghana determined in December 2018 that the institution was insolvent due to
additional provision for loan losses and impaired Investments resulting in a negative
Capital Adequacy Ratio and a negative net worth. A further assessment of the
institution’s investments as at end-May 2019 led to a further deterioration of its capital
adequacy ratio and net worth.
The Bank of Ghana engaged the Board and Senior Management on the need to inject
additional capital to rectify the capital deficiency. However, efforts made by the
shareholders have failed to yield the desired result.
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The specific issues that led to the revocation of its license included the following:
a. The institution’s adjusted Net worth of negative GH¢2.29 million as at end May
2019 indicates that its paid up capital is impaired in violation of Section 28(1) Act
930.
b. The institution’s adjusted capital adequacy ratio of negative 18.77% as at end
May 2019 is in violation of Section 29(2) of Act 930.
c. The institution has persistently breached the minimum Cash Reserve Ratio
requirement since June 2018. Cash reserve requirement as at end May 2019 was
0.33%.
d. The institution did not appropriately classify nine (9) impaired loan accounts
which resulted in additional provision for loan losses during an on-site
examination conducted in December 2018. The institution’s non-performing
loans (NPL) ratio stood at 64.73%.
e. The institution failed to conduct proper due diligence on its counterparties
resulting in the impairment of some investments. - LEGACY CAPITAL SAVINGS AND LOANS LTD.
Legacy Capital Savings & Loans Company Limited (LCSL) was licensed by Bank of Ghana
to operate as a savings and loans company on August 12, 2016, after operating as a
microfinance institution from October 30, 2013. It commenced operations as a savings
and loans company in November 2016.
The institution was found to be facing liquidity challenges in August 2018. A subsequent
assessment indicated that the institution was insolvent and also facing serious liquidity
challenges. The institution’s adjusted capital adequacy ratio was negative as at end-May - The Bank of Ghana has since August, 2018 engaged the Board and Senior
Management on the need to inject additional capital.
The specific issues that led to the revocation of its license included the following:
a. The institution’s adjusted Net worth of negative GH¢19.52 million as at end May
2019 indicates that its paid up capital is impaired in violation of Section 28(1) Act
930.
b. The institution’s adjusted capital adequacy ratio of negative 16.96% as at end May
2019 is in violation of Section 29(2) of Act 930.
c. Non-performing related party exposures of GH¢4.49 million constituted 200% of the
institution’s reported net own funds in breach of Act 930.
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d. The institution has consistently breached the minimum cash reserve ratio
requirement since August 2018 due to liquidity challenges. The cash reserve
requirement as at end May 2019 was 5.85%
e. The institution failed to keep accounting records in a manner that gives an accurate
and reliable account of its transactions.
f. Poor loan underwriting standards resulting in the impairment of loans. - MIDLAND SAVINGS AND LOANS COMPANY LIMITED
Midland Savings and Loan Company Limited was licensed by the Bank of Ghana to
operate as a Savings and Loans Company on October 21, 1996. It commenced full
operations on March 13, 1997.
The institution was found to be facing liquidity challenges in January 2017. A
subsequent assessment indicated that the institution was undercapitalized and also
facing serious liquidity challenges. The Bank of Ghana has since August 2018, engaged
the Board and Senior Management on the need to inject additional capital.
The specific issues that led to the revocation of the institution’s licence included the
following:
a. The institution’s Net worth of negative GH¢148.92 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 311.91% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The institution failed to conduct due diligence on counter parties resulting in the
impairment of some investments. In addition to the impairment of the
investments, the persistent operational losses have resulted in an adjusted
negative capital adequacy ratio and negative net worth as at August 31, 2018.
d. The institution is over exposed to related parties such as Liberty Asset
Management, Liberty DMI Microfinance and Griffin Financial Services continue to
be rolled over in spite of the liquidity challenges it faces.
e. The company has consistently breached the minimum cash reserve ratio
requirement. Cash reserve requirement as at end May 2019 was 0.23%.
f. The company failed to keep accounting records in a manner that gives an
accurate and reliable account of its transactions. As a result, the institution is
unable to submit prudential returns regularly and could not provide the various
schedules that reconciles with key balance sheet balances such as loans and
investments.
g. As a result of the liquidity challenges, the company is unable to provide adequate
funds to run the various branches thus rendering the branches inactive.
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h. The inability of the company to honour customers’ withdrawal request have
resulted in customers resorting the use of their lawyers in filing claims on the
institution and complaints to the Bank of Ghana. - STERLING FINANCIAL SERVICES LIMITED
Sterling Financial Services Limited was licensed by the Bank of Ghana in 1997 and
subsequently commenced its operation.
The institution reported a capital adequacy ratio of negative 1,469.39% as at end-March
2010, on the account of significant deterioration in the quality of loan portfolio. The
institution has therefore been insolvent and experienced serious liquidity challenges. As
a result, the institution could not honour customer withdrawals. The Bank of Ghana has
engaged the Board and Senior Management and recommended them to inject
additional capital to rectify the capital deficiency but that proved futile. The institution
stopped submitting prudential returns to the Bank of Ghana in May 2010 and
subsequently folded up its operations in 2011 without notification to the Bank of Ghana. - UNICREDIT GHANA LIMITED
uniCredit Ghana Limited (uniCredit), formerly Kantamanto Savings and Loans Company
Limited, was given an operating license in October 1995 and commenced operations on
1
st November, 1995. In 2006, the Institution was acquired by the Hoda Group of
Companies and subsequently its name was changed from Kantamanto Savings and
Loans Limited to uniCredit Ghana Limited in March 2007.
The Institution is currently over exposed to a related party, uniSecurities Limited, a sister
company. The institution’s inability to access its funds from uniSecurities, even though
overdue, has resulted in severe liquidity challenges and its inability to meet withdrawal
requests of customers.
uniCredit Savings & Loans Ltd. was found to be insolvent with a negative capital
adequacy ratio and negative networth following the Bank of Ghana’s assessment as of
December 2018. The Bank of Ghana directed the Board and Management of the
institution to immediately inject additional capital to address the capital deficiency but
this has not been successful.
The specific issues that led to the revocation of the licence of the institution included
the following:
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a. The institution’s adjusted Net worth of negative GH¢221.32 million as at end May
2019 indicates that its paid up capital is impaired in violation of Section 28(1) Act
930.
b. The institution’s adjusted capital adequacy ratio of negative 97.83% as at end May
2019 is in violation of Section 29(2) of Act 930. This is mainly due to the nonperforming related party exposures of GH¢160.10 million to uniSecurities which is far
in excess of its negative networth.
c. The Institution has been breaching the statutory cash reserve ratio requirement since
April 2018.
d. The institution is unable to meet the deposit withdrawals of customers due to its
severe liquidity challenges. The Bank of Ghana has been receiving many complaints
from the institution’s customers about their inability to access their funds.
e. The institution has a high percentage of non-performing loans. - WOMEN’S WORLD BANKING GHANA (WWBG) SAVINGS AND LOANS LIMITED
WWBG was incorporated on May 31, 1982 as a Non-Governmental Organisation and
became fully operational as a private limited liability company on September 17, 1996.
The company was subsequently licensed by Bank of Ghana in October 1996 as a savings
and loans company.
The Bank of Ghana determined that the institution was insolvent in October 2017. The
Bank of Ghana has since March 2018 engaged the Board and Senior Management on a
number of occasions on the need to restore the institution’s paid up capital and capital
adequacy ratio to the required minimum levels. The shareholders have not been able to
comply with a capital restoration plan the institution submitted on March 27, 2018 that
proposed additional capital injections to meet the required minimum capital adequacy
ratio. The institution’s reported capital adequacy ratio and net worth were both negative
as at end-May 2019.
The specific issues that led to the revocation of the institution’s licence included the
following:
a. The institution’s Net worth of negative GH¢45.56 million as at end May 2019
indicates that its paid up capital is impaired in violation of Section 28(1) Act 930.
b. The institution’s capital adequacy ratio of negative 46.62% as at end May 2019 is
in violation of Section 29(2) of Act 930.
c. The institution persistently recorded accumulated losses due to poor loan
underwriting standards resulting in high non-performing loans.
d. The institution has consistently breached the minimum cash reserve ratio
requirement since March 2019.
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e. The institution’s failure to implement Bank of Ghana’s on-site examination
recommendations.
f. The institution’s external auditors expressed an opinion on the institution’s 2018
audited financial statements that a material uncertainty exists that may cast
significant doubt on the company’s ability to continue as a going concern.
Source: BoG
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